There are several global industries in which different parties in the industry must transfer information to one another. It is often the case that these parties use different IT systems, which where not designed to communicate with one another. These systems lack a standard interface and/or connectivity capabilities. Distribution of information between the parties is done primarily through mail, fax, phone, terminal emulation software, and web sites—an expensive and inefficient process. At many stages of the process, data must be manually re-keyed, reformulated, revalidated, or manipulated multiple times so that it can be processed by a variety of incompatible systems. The complexity, redundancy, and manual nature of the process means that errors may occur at multiple points, resulting in high costs and slow turnaround times.
There are currently two possible solutions to these difficulties. The first is to build a special purpose interface and/or to undergo integration projects, in order to modify the existing systems so that the systems are capable of communicating with each other. Integration projects between different systems are generally very expensive and time consuming, and require substantial cooperation from the different parties involved. Additionally, the result is tailored to specific systems. Adding a new system, or changing one of the existing systems, generally requires changing the communication interface, or performing additional modifications of the systems, in order to accommodate the new conditions.
The second method currently in use for resolving communication difficulties between systems is to define a communication standard. Systems complying with the standard are able to communicate with other systems employing this standard. However, adopting a new standard is ineffective unless all the different systems support the adopted standard. For industries that are very diverse, achieving a unified standard is almost impossible. Additionally, changing existing systems to comply with a new standard is very difficult. The changes required for each proprietary system are generally expensive and time consuming, especially for legacy systems.
The insurance industry is an example of an industry which suffers from inefficiency due to incompatible data formats of existing systems. Distribution of information between insurance industry members (for example communications between insurance companies and agencies) is currently done mostly by mail, fax, and telephone, a very expensive and inefficient process. Any information flow, such as policy submissions, endorsements, and policy information inquiries, requires entering the same information into several different systems. An agent often has to enter information once into the agency management system and then reenter the information into each carrier's terminal (or web site), or send it by mail to each carrier. When the information reaches its destination, the same information is entered again by each carrier into its own systems.
Insurance industry members are often reluctant to make significant changes to their existing systems due to the high costs of such projects, questionable return on investment (ROI), long implementation and integration periods and the retraining required to company employees. The insurance industry in the U.S. has been trying many years to create standard formats for collecting and transferring data through ACORD (the Association for Cooperative Operations Research and Development). However, adoption of the ACORD standard still requires making changes to existing systems, and enables communication only with other parties who have adopted the standard.